OTTAWA - The union representing mechanics, baggage handlers and other ground crew at Air Canada says the federal government's decision to impose arbitration on its talks with the airline is eroding labour rights.

"This will undermine free collective bargaining and poison labour relations across Canada," said Dave Ritchie, Canadian general vice-president of the International Association of Machinists and Aerospace Workers.

Citing a need to protect the economy, Labour Minister Lisa Raitt proposed back-to-work legislation on Monday that would send the airline's disputes with the Air Canada Pilots Association and the machinists' union to binding arbitration.

Under the "final offer selection" arbitration process, the union and airline will both put forward their best offer and an arbitrator will pick one.

"Final offer selection does not allow the arbitrator to take into consideration any one item for which it would make sense to change on either side's behalf," Ritchie said.

"(Raitt) could have accomplished her objectives through the introduction of compulsory arbitration which gives the arbitrator the latitude to forge a balanced agreement."

But the minister says the federal government is not taking sides in the dispute by initiating final offer arbitration.

"Who's to say that the arbitrator is not going to pick the union's point of view?" Raitt asked rhetorically at a news conference.

"They have fair ball at the table."

The IAMAW is the largest union at Air Canada (TSX:AC.B) and represents more than 8,600 workers at the airline.

The pilots' union and the machinists are the last two groups with which Air Canada needs to reach an agreement.

Flights at Air Canada were set to stop this week after the airline said it would lock out its pilots and the machinists union said it would strike in the midst of the key spring holiday season.

However Raitt stepped in and blocked a work stoppage by referring the matter to the Canada Industrial Relations Board.

In September, the airline reached a deal with its flight attendants after a strike vote prompted Raitt to intervene.

And a walkout by the airline's customer service agents represented by the Canadian Auto Workers lasted just three days last year after the minister threatened back-to-work legislation.